Monday, September 12, 2016

Syria And Ukraine Have Putin In Common

Syria Bombing Has Destroyed Whole Cities
Last Saturday top Russian and American diplomats cheered the details of the potential breakthrough deal resulting from weeks of negotiations. The talks between the U.S. and Russia have reportedly produced a sweeping new agreement which includes a nationwide ceasefire and coordinated strikes against ISIS as well as al Qaeda-affiliated militants. Also, it will result in and allow  increased humanitarian aid to areas of Syria badly besieged by the country’s long, bloody civil war. Most people understand that Syria can no longer be viewed as a stable country with a bad leader, it has become a humanitarian disaster.

The pictures being broadcast across television screens throughout the world of city streets bombed and blown to smithereens, dead women and little children killed by cluster bomb attacks show Syria to be a country far different from what we were facing when we decided to go into Iraq. The proof many Americans have chosen to ignore the situation is the shockingly revealed when Libertarian presidential nominee Gary Johnson drew a blank during a live interview on MSNBC when he was asked what he would do to address the situation in Aleppo, perhaps the most devastated city in the five-year civil war in Syria. "What is Aleppo?" Johnson replied when asked how he would address the crisis there. "You're kidding," journalist Mike Barnicle said. "No," was Johnson's response. 

Secretary of State John Kerry said in Geneva, "Today, Sergei Lavrov and I, on behalf of our presidents and our countries, call on every Syrian stakeholder to support the plan that the United States and Russia have reached, to ... bring this catastrophic conflict to the quickest possible end through a political process." Kerry also expressed hope the peace deal, worked out through their marathon peace talks, “has the ability to provide a turning point,” this will, of course, depend on whether all sides honor a cessation of hostilities set to begin at sundown Monday. I'm afraid those who have used and subscribed to the highly scripted talking point that Putin is a "thug and a bully" must be cringing because Russia is instrumental in this agreement.

For a moment let us be optimistic and pray we are moving in the right direction to ending Syria's civil war. Several years ago I began to advocate the best solution will ultimately be to push towards a breakup of Syria with Assad or one of his people in control of the Alawite area in exchange for freeing the remaining part of the country to rule itself, and I suggest we should not be surprised if things move in that direction. Many reasons exist as to why the deep wounds the Syrian people have suffered will not heal and why they can no longer live as one big happy family. This brings me to the crux of this post and far-fetched idea based on what both Syria and Ukraine both have in common, and that is Putin. Because of this, we are now in the unique situation to resolve two major conflicts at once if the desire to do so outweighs the egos of the players as well as their petty differences and the lust for making money from producing weapons of war.

Picture Ukraine Front Lines-War Is Hell
It is simple to see a similar agreement that eastern Ukraine would also become a sovereign nation would go a long way in getting Putin to put Syrian President Bashar al-Assad's feet to the fire and move him towards agreeing to surrender part of his country. It is clear that Syria is to broken to be fixed and if Assad remains in power those who have suffered and been displaced will never forgive him and live under his rule, however, a change in ruling factions is also not a viable solution in that it would unleash a wave of killings, and reprisals. Remember the Shiite-related Alawites rightly fear an Al Qaeda led triumph as the worst possible outcome, they would make the mass killing of Alawites their first priority. The secular leaders of the Syrian rebels, clustered in the exile group known as the Syrian National Council, also must worry about the extremist threat they themselves would face if the Assad government fell. 

As I pointed out some time ago the ramifications of Ukraine becoming a major battlefield are also very ugly. They would include Russia cutting off the flow of natural gas to the west and this would devastate an already troubled Europe. The idea of America getting involved or jumping into a war in Ukraine would have been hard to imagine a few years ago and has little upside while the potential for it to escalate into a major shooting war is real. Allowing events to deteriorate into a major war or possibly into what some see as World War III is very real. The location of such a military confrontation right in Putin's backyard would be a strong advantage for Russia and it is silly to think Putin and Russia would back down. This means poking the bear is not a smart move.

Even after all the American blood and treasure spent in the Middle East, we find Putin holding most the cards. His motivation for supporting and pushing Assad towards peace lies in the fact we live in a complex world and Putin would tie such a deal to a solution in Ukraine. If inclined such a deal could be negotiated and it would constitute a big win-win for the people living in two troubled areas. Like children trading baseball cards both parties want something, for America it is the end of strife in this war torn area and the halt of millions of refugees flowing into other countries and upsetting world order, for Russia, it is allowing eastern Ukraine to also go its own way. This would mean America would end encouraging and financing a war on the Russian border for little reason other than to spite the Russian leader.

With Americans tired of war and frustrated after years of spending a fortune in the Middle East with little to show for our efforts, we are facing a debate as to which is the "best worst choice" in how to proceed. The media has been fast to point out the complexity of the situation and how muddy the politics will be going forward, This includes the formation of an often talked about no-fly zone in Syria which could cost about $1 billion a month and that risks the loss of U.S. aircraft and pilots. Again I say, it has become clear no easy answer or silver bullet exist for the problem plaguing Syria and the whole region, it is also clear America's military industrial complex does not hold the key to a peaceful resolution. This means it may be time to cut a deal.

Footnote; I do not see Putin as a leader with saint-like qualities, he is tough and hardcore. at the same time, I see Obama's so-called reset with Russia has been a dismal failure. America's policy towards Russia seems to have become an ego match between the two leaders and time again Obama has come up short, this has driven Russia closer to China and constitutes a major mistake in foreign policy. The large joint naval exercise currently underway highlights this view. More on this in the article below.

Footnote #2; The PBS Newshour reported last night that a new ceasefire was to take place in Ukraine and the Ukrainian government would be voting on whether to give Eastern Ukraine political autonomy. It seems I may of been right and Putin has twisted Kerry around a bit.

Monday, September 5, 2016

Timing A market Collapse Is No Easy Task

Timing a market collapse is no easy task, last year on Labor Day I wrote a version of the article below titled "The Turning Point May Be Soon Upon Us". This is relevant to the holiday in that it is about money which is the commodity most of us trade our labor for. Again, I offer it up with some minor updates. Why should you listen to someone who has been wrong on the economy for so long? I humbly reply, that while I'm bearish and have underestimated how long those in power could continue to keep the wheels on our wobbling economy, what is happening in my world of both commercial and residential real estate has some very frightening overtones. Many people work hard for their money and even harder to save a bit of it but they are often lulled into complacency when it comes to protecting it. One of the saddest things to witness is when someone who has worked very hard suddenly becomes penniless because an investment or economy turns south.

I'm reminded of the story about how many people describe going bankrupt, slowly at first, then quickly at the end. We should remember this market has far exceeded the upside expectations of many bulls while the economy has languished and in many respects failed to regain all the ground lost since 2007. As I have stated, timing a market top is difficult, the question I again put forth is, are we reaching the turning point? A turning point can signify a historic or watershed event that is looked back on and commented upon for years, market crashes, the great depression, major economic shifts can fall into this category. In the past, I have written about the unpredictability of predictions and how a random black swan crashing through your front window plays havoc with the idea of always and never.

Currently, America and much of the world has been washed along on the momentum created by a wave of freshly printed money and low-interest rates. Auto sales have flourished because of super low-interest rates, and housing has also been pushed along by artificially low-interest rates that distort what might be called the natural laws of economic order. The historically low-interest rate environment has also masked inflation by lowering payments on loan and debt. In a free market, the law of supply and demand is left to efficiently allocate capital and in doing so determine true market value. By corrupting this force those in power have temporarily masked reality and the serious structural problems within the economy. Washington has failed to make the reforms necessary to make America more competitive, problems have been ignored and allowed to fester.

Job creation has been the weakest seen during any recovery on record, to make matters worse many of the jobs that have been created are of poor quality. Far too common we see low pay, none or little in the way of benefits, and many of the jobs today are only part-time. This means consumers are not in a position to spend the economy forward and out of this mess. Massive numbers of Americans have been unemployed forever and a day or simply dropped out of the workforce giving the illusion that the unemployment rate while a bit high has returned to an acceptable level, it has not. The decay and harm being done and the toll this is taking can be seen on city streets throughout America as building and houses sit empty and underutilized. The cost of carrying and maintaining this underused resource is staggering.

In this environment the burden of caring for a large number of people that need financial help has shifted onto the government, the projections made years ago had not envisioned such numbers. Talk that the budget deficit is rapidly coming down misleads many Americans into thinking that things will be fine but make no doubt we are still spending far more than we take in. The ugly truth many people choose to ignore is that starting in 2017 entitlements will become the driving force and carry the deficit further into the nosebleed territory.  Any claim that the Obama administration has the budget deficit back under control is a total lie. We are mired in the midst of the greatest government debt bubble in the history of the world. Even future budgets based on the most optimistic projections are ugly. Lies and changing rules such as recalculating how the GDP is figured only takes us further down the rabbit hole.

Washington has failed us, our politicians are always returning from another break, something most Americans would call "a paid vacation".  Again they will confront many of the issues they have continually kicked down the road. Making sense of our massive deficit has become far more difficult in these hard times yet cutting spending remains unpopular with many Americans who want more from their government. Central banks have been printing money for years with mixed results and all indications are that sooner or later interest rates will be rising putting, even more, stress on a struggling economy. Figures show the rich have grown richer while the middle and lower class have been smacked in the chin. The "too big to fail" banks have become a symbol of what is wrong with America.

Again this year let us ice this cake of  "difficulties" with a mix of troubles brewing throughout the world. Last year it was the drumbeat of war in Syria, Iraq, Ukraine, and many other hot spots, this still exists. Currency games, the carry trade, and money rapidly flowing across borders coupled with computer trading that distorts markets. Today we can add to the list a very contentious American presidential election, China collapsing in debt, ISIS and an unstable Middle East, as well as a wave of refugees flowing across Europe fleeing death and destruction. Forget all the hocus-pocus from the media and clowns about what historically is the best and worst months for the market or how well the market does when a certain team or party wins this or that. This bull market has gotten long in the tooth and exceeded the average length they normally run, caution would be in order. It might not be a good time to go double or nothing.

Saturday, September 3, 2016

China's Aviation Industry Quickly Ramping Up

China's fledgling aviation industry is ramping up and when it hits its stride we can expect cutthroat competition. Aviation is the practical aspect or art of aeronautics, being the design, development, production, operation and use of aircraft. As the industry takes flight over the next decade America may be saying say goodbye to a big chunk of its exports in this field.  This has been some time in coming, when an article appeared in Wired in 2009 titled, "China Rushes Into Building Planes" the threat of China being competitive in this high-end market seemed years away even with an expected  push from its government. Politics plays a big role in industry and the Chinese government which has long aspired to play the "plane game" has no qualms admitting its big role in developing the country’s aviation industry. Miao Wei, vice minister of industry and information technology, has been quoted saying the government encourages the development of export-oriented aviation products. 

Some might be inclined to call the industry's relationship to the government a "state subsidy" and they are right, this makes China's move a big deal. According to Boeing, the Chinese market for airplanes will be one of the world's richest. Airbus estimates the size of China’s passenger aircraft fleet will triple during the next 20 years. Translate that into actual orders, and you’re looking at something on the order of 2,800 new planes with a book value of $329 billion. Boeing has projected it could sell China 6,330 planes worth $950 billion during the next 20 years. Nearly three-quarters of the planes for its civilian airlines will be single-aisle with about 700 wide bodies. Boeing wants to sell China as many of those airplanes as it can. Just as naturally, Boeing knows that it will have to share at least some of the market with its arch-rival, Airbus. Unfortunately, it's starting to look like Airbus won't be the only rival Boeing has to contend with because of China aggressively pushing forward.

Now Airborne C919 Will Be A Major Player
An article in USA Today in the fall of 2009 focused on the planned C919, a single-aisle jetliner designed to seat up to 190 passengers, called the "big plane" project. It will directly challenge U.S. plane-making giant Boeing and European rival Airbus which until now have dominated the global jetliner market. The C919 project is a showcase for China's ambition to be more than a low-tech producer of consumer goods for the world. Back then the article reported the first flight wasn't scheduled until 2014, and the jet wouldn't be available commercially until 2016. But even back then the Chinese manufacturer claimed the twin-engine, narrow-body design of the C919 is superior to its competition the Boeing 737, the best-selling jetliner in the world, and its competitor, the Airbus A320. COMAC (Commercial Aircraft Corp. of China) also says it can bring the C919 in at a price lower than the $50 million range that Boeing and Airbus charge for each of their planes.

Unfortunately, time has a way of quickly slipping by, so we fast forward to today and find that at the end of 2015, at that time COMAC finally delivered its first new "Advanced Regional Jet for the 21st Century," dubbed ARJ21. The buyer, local carrier Chengdu Airlines contracted to buy 30 of these new planes and across China, more than 300 orders from various airlines and airplane-leasing firms have been placed. The ARJ21 is tailor-made for the Chinese regional market, it is capable of carrying as many as 90 passengers on trips as far as 1,300 miles. When departing from central China, that's enough range to allow direct flights to just about any point in the country. The plane is built with about 50% U.S.supplied parts and with avionics from the well-respected Rockwell Collins and engines from General Electric. This is the result of  a trade delegation led by President Obama back in 2009. This plane will not impact Boeing which doesn't play in the 90 passengers and below market but it will compete with models from Brazil’s Embraer and Canada’s Bombardier.

On Chinese President Xi Jinping's first state visit to the USA, he made a couple deals said to help foster relations between the two countries. One was to order 300 Boeing aircraft for $38 billion, this was tied to Boeing building the first "aircraft completion plant" in China, it was to be Boeing's first non-U.S. plant. Considering China's knack, or shall we say, history, of taking advantage of sucking production ideas from manufacturers this move was a watershed event to many industry watchers. As noted above China is now in a far better position to realize its dreams to develop this industry because part suppliers such as GE, Pratt & Whitney, and other firms are eager to supply the engines and other key components. The politics of globalization a few years ago have paved the way forward and makes China's effort to produce planes far more likely to succeed.

Returning to the subject of its larger plane, the Chief Designer of the ARJ21, Wu Guanghui, told China Daily that COMAC is turning to new, lightweight carbon composites in place of steel for the plane's construction to gain the 12% to 15% in fuel efficiency. Boeing, which is the pioneer in composite design, has had difficulty in bringing its first composite plane, the 787 Dreamliner, to market, however, once a company pioneers the way we find those following in their footsteps far a far easier time following in their tracks. Boeing and Airbus have delayed plans to build more fuel-efficient, narrow-body planes to replace the 737 and A320 because in cost billions to create a new plane adding composites alone won't contribute enough fuel-efficiency savings to justify the move. Also, price isn't the sole factor for airlines in buying a plane, factors such as overall quality, reliability, maintenance and readily available replacement parts, as well as the pilot and mechanic training that manufacturers provide, are important for airlines.

It should also be noted that building commercial aircraft has never been a consistently profitable business. Boeing and Airbus risk several billions of dollars every time they try to develop a new type of aircraft and history shows  several times where they have suffered massive cost overruns and program delays during development. The Communist government plays by a different set of economic rules and wants to use the C919 as a springboard to develop a nationwide aviation industry, it boasts the involvement of more than 200 companies, 36 universities and hundreds of thousands of personnel in the plane's development.  Some optimist claim China's airline industry has become a private-sector industry and will ignore the government's influence, just because the C919 will be made in China doesn't mean all the Chinese carriers will stop buying 737s and A320s to buy only C919s. They also claim it will be decades before the Chinese will be able to produce anything close to the numbers of planes that the Chinese market will demand.

So where is this going? China is investing big in this vision with its State media touting the "advanced technologies" that will be used throughout the plane, from new avionics to the plane's frame partially made of light composite materials. It is important to note that another company, Avic, is currently working on China’s first helicopter factory. The bottom-line is that it would be incredibly naive to underestimate China's resolve in rapidly becoming a player in a field that will move it up the manufacturing food chain. With China's experience of building cities from scratch, why build just one factory when you can build twenty? This means we should not expect this industry to grow organically but it is logical it will be engineered by an aggressive government with a mission. Expect competition in this field to rapidly intensify, it is important to note the Chinese aren't alone among emerging economies wanting to expand into the jetliner business. Russia and Brazil have new jets coming out, too. 

Friday, September 2, 2016

Trump Signs, Now You See Them, Now You Don't!

Sadly, This Has Becoming Fashionable
Something I thought was merely a phenomena in my highly contested state primary apparently was not an aberration but has, and is occurring across the nation, that is vandals tearing down and removing political signs. In this case, I'm referring specifically to Trump Signs. Now You See It, Now You Don't! Several videos exist where cameras have caught people in the act of ripping down Trump signs and usually taking off with them.

Call it vandalism, call it a lack of respect for another person's property, call it an illegal violation of the constitutional rights of the signs owner, but please do not call it good harmless fun! I have seen several news stories on this and heard the owners of these signs rile at those committing these acts. This has happened to me, both at home and in front of  my office it has also happened to several people I know. Sadly the rampant theft of these signs has become fashionable and justified by the perpetrators deluding themselves into thinking they are in some way righting a political wrong. Erin Burnett on CNN acknowledged just how common this event was becoming when she called it "The crime that is sweeping America, stealing Trump yard signs"

This Proud Thief Even Photographed Herself
Sadly I have yet to hear the news media or any Democratic candidate or party official condemn these actions and attempt to distance themselves from the perpetrators. Call it my vivid imagination gone wild but what I do hear in the voices of the often liberal media reporting such stories is a "can you believe this?" with a hint of admiration, and sometimes a "wow that was fast comment"  as they broadcast a video of a theft in progress.

Many Trump supporters will quickly concede that he is not universally loved and respected but the same can be said about Hillary Clinton. In an effort to add a little zest to this post and sort of fill the bottom in, add flesh to the bones, or whatever, I decided to "Bing search" the word "stealing" The search proved to be little in the way of help. I did find, however. that many people thought that a major factor in deciding whether taking something that wasn't yours should be judged as a crime should be based on your level of "need" rather than a strict moral code. It could be argued the stealing of Trump signs falls more into the category of vandalism or destruction of property which is far more difficult to defend. In society, if you want others to respect your property and rights it would seem only fair for you to act in the same fashion. 

By making light of these acts and pretending it doesn't matter or that Trump deserves such scorn the media's general reaction tends to only reinforce and almost encourage a slew of copycat attacks on Trump signs. In regard to these acts of vandalism, it is somewhat ironic that those liberals claiming to "represent the moral high-ground" would be those most giddy and pleased to see the blatant disrespect demonstrated as the rights of others are violated. Fifty million years from now this will be just another insignificant historic event, however, at this point in time, it speaks volumes as to where we as a society have gone and the current political angst that exists.

Thursday, September 1, 2016

War Carries With It A Huge Hidden Cost

Sadly the mess governments have made of the world during the last several decades continues to play out. As the world matured, communications improved, and as people traveled more many of us hoped the catalyst for war would diminish. Instead, with new technology, mankind has only expanded our abilities to spread death and destruction. National pride, political agendas, religious and ethnic hatreds are some of the biggest roadblocks to world peace. Sadly over the history of mankind peace has been the exception rather than the rule. The true reality is that across the world few mothers want to see their children killed and most farmers want to be left alone to raise their crops and earn a living.

Maars Military Robot
The sad reality we face is that plans have been made that move us solidly in the direction of "automating war." The development of drones and killer robots is well under way and will massively change warfare and take mankind'' savagery to a new level. While those who benefit from the production of weapons busy themselves with promoting war as a solution to our woes as an answer warfare often fails to be either easy, swift, or true. For proof, we need only look upon the millions of people displaced and forced to flee war-torn areas, these refugees often pay the price for the billions of dollars of military hardware produced at a profit and pumped into countries across the world.

War Has Many Unintended Consequences! 
Unfortunately, with progress in technology comes new and more efficient ways to kill. The invention of the Gatling gun in the 1860s added a new dimension to killing, it was the first true weapon of controlled mass destruction. The weapon rotated 10 barrels and could expel bullets at the rate of 1,000 rounds a minute. How war is waged has changed with each advancement in technology, it would be folly to line up your army as in the days of old. Technology has spurred the ongoing and clumsy debate about inhumanity and the price of war. As is man's way he has adjusted, but today nuclear weapons may have taken the price too high.

Governments are not always dependable and instead of  protecting the rights of those they govern and serving the people they tend to stray into other less mundane ventures.  Governments are often attuned and highly geared to serve the agendas of special interest.  This is one of the main reasons they often lead us into wars. It is not that the average person has a burning lust for bloodshed and destruction that takes us down this path. The argument that human nature leads us to war is pure folly, if that were true people would rush spontaneously towards such carnage and joyfully kill their neighbors.  Governments go to enormous lengths to persuade people to go to war using the tools of patriotic seduction, propaganda, and coercion. Governments convince and mobilize the people by painting a picture of an evil enemy that must be stopped.

It seems the first casualty of war is truth. In the song "The Patriots Dream" by Gordon Lightfoot, the songwriter talks about old men blinding young men by their past glories and sending them off to their deaths. Societies that claim each and every life as equal and valuable often experience a disconnect when it comes to war, especially when it comes to the dead of their enemy. Time and time again peaceful men have shown the amazing ability to be transformed into killing machines.  War can be very corrupting to the physiology of the soldiers participating and asked to kill civilians and noncombatants.  Desensitized to death, these soldiers often find adjusting and returning to normal society impossible.  War poisons all the participants and destroys lives.

War Is Ugly
Warfare has proven to be a pathetic option to bring about positive change, it may change things, but to what degree and for how long. The loss of life of an individual is often insignificant except to their loved ones.  One of the harsh realities of modern war is that it  has become a less personal way to die.  Years ago it was hand to hand combat, looking into the eyes of your adversary, now you die by the hand of technology and often without any warning. Modern warfare is more abstract with many soldiers more emotionally detached from the carnage. If the military had its way soldiers would be trained on video games and placed on autopilot.

A lack of Knowledge on the part of its citizens does not bode well for society when it comes to our ability to foster intelligent government. The term "need to know" should be revisited and changed to "we all need to know as much as possible". Time and time again we have seen that social and political evolution is preferred over revolution which is often unstable. Bubbling up through the forces that bring us to war is the stupid and shameful myth that it is good for the economy. While war does line the pockets of a few industrialist and businessmen the cost is great and outweigh the benefits. War brings about the wrong kind of economic growth.
Across the world, many of the people delegated to lead us continue to deny that war tends to be a Pandora's box rather than the easy answer we often seek. Conflicts will always exist in our world, we must work towards developing a consensus of what is in man's best interest. Yes, we must defend ourselves, but as stated earlier in this article, mothers value their children, the peasant in a rice patty field values his ox, neither want them killed in a war.  If we look at every war ever fought we will find that most of the people affected by the violence only wanted to be left alone.  Though we live in an imperfect world mankind should not bring more misery upon himself by self-inflicting injury.  We must remember and mourn for all of the heroes that keep dying for God and Country at the request of the latter.

 Footnote; This post dovetails with many of my recent writings. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged. An issue that has become more relevant today is that of sovereign borders. Below is an article that explores some of the reasons on why we can't just get along.